Differences of Opinion

26 Pages Posted: 22 Sep 2016 Last revised: 24 Sep 2016

See all articles by Dionissi Aliprantis

Dionissi Aliprantis

Federal Reserve Banks - Federal Reserve Bank of Cleveland

Date Written: September 20, 2016

Abstract

This paper studies an agent forming beliefs by translating data into signals about the truth of propositions. The agent faces ambiguity when she observes low-quality data yielding set-identified signals. Rules for decision-making under ambiguity choose the single belief generating an extreme utility. Separating belief formation from decision-making, I suppose the agent’s objective is to choose the single belief replicating what would occur with high-quality data yielding point-identified signals. I allow the agent to solve this missing data problem using signals observed through her network in combination with a model of social learning. In some cases the agent’s belief formation reduces to DeGroot updating, but in other cases her updating can generate polarization and permanent disagreement, even on a connected network.

Keywords: Biased Assimilation, Social Learning, Network, DeGroot Learning Rule, Bounded Confidence, Heterogeneous Confidence, Self-Affirmation

JEL Classification: D83

Suggested Citation

Aliprantis, Dionissi, Differences of Opinion (September 20, 2016). FRB of Cleveland Working Paper No. 16-04, Available at SSRN: https://ssrn.com/abstract=2841731

Dionissi Aliprantis (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Cleveland ( email )

East 6th & Superior
Cleveland, OH 44101-1387
United States

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